Letter
Audits provide essential accountability and transparency over government programs. Given the current challenges facing governments and their programs, the oversight provided through auditing is more critical than ever. Government auditing provides the objective analysis and information needed to make the decisions necessary to help create a better future. The professional standards presented in this 2018 revision of Government Auditing Standards (known as the Yellow Book) provide a framework for performing high-quality audit work with competence, integrity, objectivity, and independence to provide accountability and to help improve government operations and services. These standards, commonly referred to as generally accepted government auditing standards (GAGAS), provide the foundation for government auditors to lead by example in the areas of independence, transparency, accountability, and quality through the audit process.
This revision contains major changes from, and supersedes, the 2011 revision. These changes, summarized below, reinforce the principles of transparency and accountability and strengthen the framework for high-quality government audits.
All chapters are presented in a revised format that differentiates requirements and application guidance related to those requirements.
Supplemental guidance from the appendix of the 2011 revision is either removed or incorporated into the individual chapters.
The independence standard is expanded to state that preparing financial statements from a client-provided trial balance or underlying accounting records generally creates significant threats to auditors’ independence, and auditors should document the threats and safeguards applied to eliminate and reduce threats to an acceptable level or decline to perform the service.
The peer review standard is modified to require that audit organizations comply with their respective affiliated organization’s peer review requirements and GAGAS peer review requirements. Additional requirements are provided for audit organizations not affiliated with recognized organizations.
The standards include a definition for waste.
The performance audit standards are updated with specific considerations for when internal control is significant to the audit objectives.
Effective with the implementation dates for the 2018 revision of Government Auditing Standards, GAO is also retiring Government Auditing Standards: Guidance on GAGAS Requirements for Continuing Professional Education (GAO-05-568G, April 2005) and Government Auditing Standards: Guidance for Understanding the New Peer Review Ratings (D06602, January 2014).
This revision of the standards has gone through an extensive deliberative process, including public comments and input from the Comptroller General’s Advisory Council on Government Auditing Standards (Advisory Council). The Advisory Council consists of experts in financial and performance auditing and reporting from federal, state, and local government; the private sector; and academia. The views of all parties were thoroughly considered in finalizing the standards.
The 2018 revision of Government Auditing Standards is effective for financial audits and attestation engagements for periods ending on or after June 30, 2020, and for performance audits beginning on or after July 1, 2019. Early implementation is not permitted.
An electronic version of this document can be accessed at https://www.gao.gov/yellowbook.
I extend special thanks to the members of the Advisory Council for their extensive input and feedback throughout the process of developing and finalizing the standards.
Gene L. Dodaro
Comptroller General of the United States
July 2018